Capital Goods

Quincy Bienkowski
Harrison Norwood-Pictures and contributed to various ideas in various portions
Maya Casey

What are Capital Goods?

     Capital goods consist of tangible goods used by a company or business to create or produce other goods. Usually these cost a great deal of money, but the money earned from the products produced is the profit. Capital goods are essential for the effectiveness of a company because the company will not produce goods without machinery or equipment (aka. capital goods). Capital goods are man-made, durable, and one of the four factors in production.



~Capital goods can be inherited- Capital goods are owned within a company, therefore they can be passed down within the business or company.

~Capital goods are reusable- Capital goods last for a long time and can be used over and over.

~Capital goods are controlled by technology- Capital goods can be controlled by a computer and don't require manpower to constantly monitor the machine.

~Usage of Natural Resources- Capital goods utilize minerals, mountains, and seas for productive purposes with machines.

~Increase production- Rather than products being constructed by hand, capital goods allow us to use machinery such as hammers, screw drivers, and technology to produce in mass quantities.

~Essential for the economy- If we did not have capital goods we wouldn't have businesses that sell products.



~Capital goods are expensive- If the costs of capital goods outweigh the profits the company would have a detrimental loss in money. Because of their durability, capital goods are very expensive.

~Work can be monotonous- With capital goods rarely replaced businesses are stuck with the same ones for a long time and work can become tedious.


Examples in the Local Market Place

        There are many different examples of capital goods in Vienna. It can be anything from the CAT machines that are used to build households to the screwdrivers and hammers used to build small, intricate clocks sold at the Clock Shop of Vienna. Even common kitchen items like a stove are capital goods when they are used to create consumer goods like in a restaurant. Also, there are various examples that cannot be seen. Most stores in Vienna receive shipments from factories where the actual manufacturing takes place. The stores have to pay a portion to the manufacturers and the leftover money is their profit.


General Examples

Airplanes, cars, buses, or trains-They provide the service of transporting goods.

Computers,ovens, refrigerators, and dishwashers- These are only capital goods if they are used by a business, not used at home (unless it is a home business).

Machinery- The products that actually create the goods.

This video shows the process in which the color coding for the iPhone 5c is made. This video features several capital resources contributing to the creation of this product. Some examples shown in this video are the machinery that moves the iPhone down the assembly line and the computerized items that add buttons to the phone.


How are Capital Goods Used to Create Consumer Goods and Services?

           In a lot of companies capital goods have their own sector called the industrial sector. In past years the machine would've been supplied and controlled by human resources but now, with more advanced technology, machines can be controlled from a computer that charts progress and productivity. These computers make it much easier for products to be produced because they work faster and in certain cases, they can produce in mass quantities. Therefore companies are left with constant supply which increases their demand. In the image above, it shows the process in which candy canes are made. In this, you can see a lot of machinery (capital goods) which do most of the work, and you can also see human resources, labor workers, which is another one of the factors of production.


What are the Factors of Production?

Land/Natural Resources- These are resources that we can get from the land and nature around us. (e.g. minerals, wood (trees), water, etc.)

Labor/Human Resources- These are the people who work to create the products and/or sell them. (e.g. factory workers, farm workers,etc.)

Capital/Man-made Resources- These are man-made resources that are used to create other resources. (e.g. machinery, hammer, work tools, etc.)

Enterprise/Entrepreneurship- This is the person who starts the business. (e.g. Bill Gates)


How Do Capital Goods Relate to Factors of Production?

          Capital goods relate to factors of production because they are they items that are used by the labor to create the good. There are four different parts that go into factors of production. Land, labor, capital, and entrepreneurship. Capital goods have an effect on every one of those factors and vice versa. Capital goods relate to land because they are the things used to change or transform the land into what is needed. Capital goods correlate with labor because most of the time there are human workers overseeing the process. They relates to capital (money) because capital goods are the first thing that the entrepreneur invests in to create the product. It is all one cycle, but the capital goods jump start the process because without products, there would be no business.


What is the Importance of Capital Goods & Impact on Economy?

           Without capital goods there would be no products. We would be no more than primal beings. Even in the beginning of man we used rocks and sticks to create things and trade them with other cave men. Capital goods are the items that make the products. No capital goods, no products, as simple as that. Aside from allowing a business to create goods or provide services for consumers, capital goods are important in other ways. In an industry where production equipment and materials are quite expensive, they can barrier for new companies. If a new business cannot afford to purchase the machines it needs to create a product, for example, it may not be able to compete as effectively in the market. Such a company might turn to another business to supply its products, but this can be expensive as well. This means that, in industries where the means of production represent a large amount of a business's start up costs, the number of companies competing in the market is often relatively small.


Article Analysis and Summary

The main idea of this article is that capital good demand is increasing because our economy is ready to purchase "big-ticket" items. Part of the reasoning behind this is due to more confidence in manufacturers. This is because of increased trust in capital goods. People feel safer buying houses, cars, and house appliances because capital goods are so much more reliable. With the people on their side, businesses are more inclined to purchase better capital goods to supply the customers' demand. And with better capital goods, the people have better trust in the companies. It is all one big c

Because the capital goods are producing quickly, due to high demand, I question the safety of the appliances coming out because I'm not sure that the structure is safe. However, the main idea behind this article is that people feel safer and trust manufacturers.  Since businesses are buying better capital goods, there is a little more trust because of all the good coming from it. Take Vienna for example, there are so many "tear-down build-up," which is where they knock down a house and build on top of it. People wouldn't let these companies tear down their house if they didn't trust the capital goods and manufacturers.



In conclusion, capital goods are essential for the productivity of a company because they won't function if they don't have products to sell. The benefits outweigh the costs. Capital goods are beneficial because they utilize natural resources and they increase productivity. However, there are some disadvantages, including the high prices of the equipment or the shipping costs. It is very important that a company does not have more money than their profit going towards their capital goods. Also capital goods are the driving force behind the factors of production because they are what jumpstart a business to help them produce products. Now people are more confident in capital goods and therefore more dependable on them, which is making the business portion of our economy thrive.

~All three of us


Comment Stream